Progress for London housebuilding policy...but the clock is ticking

It's been about a month since rumours emerged of an emergency intervention by the Greater London Authority to address the collapse in housebuilding across the capital.

Several supposed dates of publication came and went – hinting at fractious debate within government – but now we have the measures, many elements are likely to boost delivery meaningfully. City Hall will consult industry for six weeks starting in November, so there may be more to come. But what we’ve seen so far suggests officials have listened closely to feedback – and the time-limited nature of the plans should incentivise teams to accelerate progress.

That said, these are only like to be the first difficult steps towards reversing this generational decline in housebuilding. Molior data shows just 965 homes broke ground in London during Q3 2025 – a slight improvement on Q2, but still well below the pace needed to meet long-term housing targets. If this rate continues, the capital is on track for only around 5,000 new residential starts in 2025. For context, the official annual target for completions is 88,000 homes – or 22,000 each quarter.

Some aspects are merely tweaks to the balance of risks. The Affordable Housing FastTrack threshold will be reduced to 20%, with a 60:40 split between Social Rent and intermediate tenures. Grant funding will be available for half of the affordable units, with benchmark rates set at £220,000 per Social Rent home. It appears that co-living and purpose-built student accommodation (PBSA) will remain subject to the existing regime – including sites on which either are the predominant uses. Sites on or released from the so-called ‘Grey’ or Green Belt will also be excluded.

We’re likely to see more schemes come forward where the economics now make sense. Much of the pipeline was headed for viability review anyway, with few projects achieving the 35% threshold. It’s not yet clear what the changes mean for developers with applications already in play – many may need to resubmit for fresh consent. That will be a blow to developers with existing schemes that are stalled for viability reasons. Plus, for developers that do take the 20% route, there’s also a heightened sales risk here, with a large share of homes still needing to be sold in what remains a subdued market.

The withdrawal of guidance restricting density and additional mayoral intervention powers should also help shift risk more favourably in favour of getting projects off the ground. Removing the eight-unit-per-core limit will significantly improve efficiencies, for example.

More significant are the 50% reduction of Community Infrastructure Levy (CIL) for schemes delivering 20% affordable housing, and the removal of late-stage reviews – both time limited. It's not unusual for schemes of more than 600 homes to have CIL bills in the range of £20 million, and savings of this scale are likely to make a meaningful difference to the viability of moving developments forward. That said, both PBSA and co-living will be excluded.

The removal of late-stage reviews for schemes able to show construction progress by March 2030 could prove pivotal – these reviews assess whether actual sales values and build costs exceed those assumed during the initial viability assessment. If they do, much of the surplus is claimed by the local authority through extra affordable housing or financial contributions. The reviews are widely seen as a serious deterrent to equity investment, often described by developers as overly complex and duplicative.

Developers stand a better chance of raising capital now they have more certainty over profits. They also have a powerful incentive to get building – these measures are time limited, so development will be more profitable now than it will be post-2028, though much depends on how the sales market evolves.

The latter point remains the elephant in the room. The previous peak in London housebuilding was in 2015, when developers started 33,782 homes, according to Molior – still far fewer than half the government's target. Developers sold 26,313 homes that year, aided by Help to Buy and plenty of off-plan investor sales closely to commencement, de-risking projects and enabling them to progress. But the government introduced a 3% stamp duty surcharge for second homes and buy-to-let properties a year later, and off-plan investor purchasing began dwindling. That levy was raised to 5% last year, following the closure of Help to Buy in 2023. Starts have now been falling for a decade.

By all accounts, nearly every element of the new measures in London has been the subject of intense negotiation between national government and City Hall, helping to explain the repeated delays. Difficult politics no doubt lie at the heart of the tension; a cut in the proportion of Affordable Housing that developers must provide is contentious, and economic analysis suggesting it is likely to increase total delivery of affordable homes often fails to cut through. 

So while the new measures will help, returning to even 2015 levels of output looks unlikely without further stimulus, particularly on the buy-side. The government has shown considerable ambition on its supply-side agenda, but ministers have simultaneously ruled out anything resembling a return of Help to Buy, and new tax incentives to boost the investment market seem off the table given the current fiscal climate. As with other contentious ideas, the real challenge is less about fiscal limits and more about how politically palatable it is to offer tax breaks to investors.

At its heart, this is a communication problem. Many of the most effective solutions currently sound like bad ideas to city residents already struggling to make ends meet. Evidence of rising housing output across all tenures, along with higher tax receipts from increased activity, would take time to materialise. Fixing the issue will require clarity and conviction – both from industry and those in City Hall best placed to deliver the message.